tv Fast Money Halftime Report CNBC September 5, 2012 12:00pm-1:00pm EDT
our twitter question today what dan mark zuckerberg say to turn facebook shares around? our favorite today john writes we're giving some consideration to running this thing like a business. there's an idea. that's it for us today. let's give wapner a big welcome home. "fast money halftime" starts right now. >> all right carl. thanks so much. welcome to the halftime report. here is what we're following on the show today. zuckerberg friends shareholders. the facebook founder is not selling. should you be buying? and china, correction or crash? a dire prediction for that country's economy and stock market. and what it means to your investments. we're trading all of the big movers today with pete najarian, john najarian, simon baker and steve grasso. our top story the market's moment of truth. investors bracing for big news
from draghi, bernanke, on friday's jobs report. pete najarian the next seven days could very well decide whether this market takes a leg up, a leg down, how do you see it? are you as bullish as you've been? >> i continue to be bullish and here is why. when i look at the volatility index we remain on the lower end. yesterday we did move up toward the 19 level. we pulled off of that level. we continue to see the financials trade very, very nicely. you look at the xlf. it remains well above the 15 level. financials stayed strong. pharmaceuticals remain strong. obviously you look at the nasdaq itself. specifically you look toward apple. that has remained strong. so there's a lot of reasons for why i have remained optimistic, but primarily it is that volatility index. that's the sentiment of the market. that's where the financial money is invested in the market and that's telling me right now the nerves are not as high as everybody else is telling us. >> so, simon baker ecb meeting, tomorrow, right? you got bernanke next week. got the big jobs report on friday. and it really is the market's moment of truth.
>> it is. and to your point the market is dealing with the increase in what is going on with the vix. be careful in here. you know, we're taking some profits while we can. you have a nice, healthy dose of cash. this is a trader's market and what you want to see having taken some profits in the short term looking where the opportunity is back here. we're buying metals. we think that is so long. we're staying away from the defenses and looking more the cyclicals, wells fargo, picked up some goldman sachs based on valuation, some of the materials, cliff's resources. it's a stock picking type of market. >> you like the sectors that have gotten us to where we are now for the year right? financials have done pretty well. discretionary names. some of the more risk on areas of the market. >> yeah. you take a little risk like we're talking about with the volatility index but a good trader's market. let's get up and get going. >> grasso, you're trader and on the floor. what's the word? >> you know, i could play both sides at this point because we're stuck here at 1406. we can't seem to crack that 1395
level to the down side. obviously the volume is light. there are a lot of people who don't care about volume. if you own stocks you don't care about volume because you just look at your pnl. the truth of the matter is you want to see more conviction to the bulls. the next week should add to our directionality trade here. think about it this way. it's either 1361 or it's 1442. i'm erring with the bears. >> grasso, i mean the markets have had a pretty good run. right? year to date. been a pretty good year. hard to argue with that. volume has been nowhere to be found for many months. >> it's so true. you know what? the top has been 1426 in the cash. like i said, we're basically a percentage off the highs. if i'm wrong i think we can rally another, you know, 2% or 3% up from here but i think that is the ultimate top. i'm willing to risk it to the upside to take that down side. >> what are you doing in the market today? if you think the market is going higher or lower from here?
>> i think we continue to trade higher, scott. i said it last thursday night that i loved the set up into the numbers that we had last week. i thought that the market was nervous as it has been ahead of every big set of numbers and what ended up happening we saw the big turn-around on friday. i remained long on that move and i'm still looking for the up side, scott. i'm trading and doing what simon is doing as well. i'm in some of these financials in particular. i already scalped in and out of goldman today. out performance on gs. and i'm looking for some of these apple plays. not necessarily the parts of the company, the people like cirrus logic and so forth and marvel and broad com but more like sprint for instance where we see a lot of activity again today ahead of the launch of the iphone 5 next wednesday. >> let's look at our chart of the day. the dow industrials and transports heading in different directions. industrials up about 7% this year. the transports have remained relatively flat moving lower again today following fedex's warnings.
so you can take the transports as a group if you'd like but what is fedex in this disappointing outlook and what does it mean for the group? >> i think what it is telling us is keep an eye on the price of oil. there was a great analyst out earlier today on cnbc who was talking about two-thirds of the guidance reduction is coming from fuel costs. that tells us when you see oil getting up towards that $9500 area that obviously is going to be a major impact that can't be factored in immediately. it can over time. but i look at this as an opportunity in a name like fedex. i missed it today. i tried to run in there and grab a little bit. it was trading down toward $84 a share. if i could have gotten it under that $85 level i would have been in today. i missed it so i didn't want to chase it. i still look at the rails. there is a conference going on right now, the projections going forward from unp who i think is still the best of all the real names. very, very interesting. the fact that they've been able to deflect some of the weakness in ag, some the weakness that had been in coal. they're starting to see a resurgence in some of the coal volumes. they expect their volumes to be up again at the end of the year.
>> doc, fedex cited weakness in china as one reason for the disappointing outlook here. should we start worrying about the caterpillars of the world and some of the other big companies with a lot of exposure there or what? >> well, again, i know you're just back from vacation judge and i know prior to your departure on vacation you were already worried about joy global. you were already worried about caterpillar and all of us are, too. however, if we get enough of the right moves out of draghi and the eurozone, then i think china's biggest customer the eurozone not us will help bail them out as well. so that's what i'm looking for, judge. rather than puking out caterpillar or joy global or any of these other stocks here near these bottoms i would rather either, a, be on the sidelines there, i don't have a position in either of those, or getting ready to get back in. >> okay. a perfect segue to you guys are pretty bullish. our next guest is as well. he has the highest year end price target on the street and despite the many september headwinds coming our way this bull isn't backing down from his
magic number. it's 1600. joining us now barry bannister is the chief macro and portfolio strategist for steffel nicholas. welcome to the program. the traders on our desk are fairly bullish. you say 1600 by the end of the year. rather ambitious no? >> yeah i do. some of the cheaper stocks would be energy, financials, materials, stthe biggest potentl to bounce. >> are you avoiding some of the headwinds that are clearly blowing in the way of the bulls? >> no. it's interesting. i heard the trader a minute ago talking about caterpillar which i covered for 22 years. typically around the mid point to the seventh inning of the cycle caterpillar hands off leadership in terms of relative strength to later cycle names in engineering and construction which i also covered. floor, jacobs engineering would win and caterpillar rise but would not beat the later cycle
names tied to the petroleum infrastructure. >> grasso, a question for our guest? >> yeah, mr. bannister. where do you fit in with china? doom and gloom or is talking about cataclysmic apocalypse basically, right? where does that fit in with your end of year 1600 price target? >> well, we've known for sometime that the u.s. went into the tank in 2008. europe two years later. china three years later. so we're several years ahead of europe and china. we're fully cognizant of the risks from overseas. i think a lot of that is in the pe of the s&p 500 and they're facing a lot of the policy choices that we made three years ago in terms of qe, rate suppression, fiscal deficits, federal stimulus and so on. >> just what makes you so sure that financials are ready for a big pop here? i mean the headwinds for the group haven't really subsided. what makes you think they're about to have a nice jump? >> well, make no mistake about it. financials are in the same position as the energy and energy services that you named
were in the early 1980s. they were coming off a very long period of bullishness. the head winds were against them for a very long time. all they represent is a trade. so when you make a good bit of return in financials, the first leg of performance two years ago was the yield curve. the current leg will be from loan growth. you sell them into strength. because financials are as busted as energy was 20 years ago. >> hi mr. bannister. this is simon. a quick question. 1600 is quite aggressive from here with what, the four months left before the end of the year. how are you getting there, was it multiple expansion, price earnings? which part of that is going to get us to 1600? >> well, it's up 20% from the 1290 low around june 1st of this year so it's not that unbelievable. we've already done half that move since june 1. we'll probably have to work for the next half. we'll need some clarity on the policy side. clarity both from overseas, the ecb, and the chinese. but also some clarity domestically on the budget,
election, and the fed's actions. but overall the economy is picking up steam. we like that productivity number today. we think gdp in the third quarter is looking stronger all the time. and you have to climb the wall of worry when you buy the stock market. >> right. we have climbed the wall of worry right? that's gotten us to where we are now. but the worries start to loom large. do they not? you do have the ecb. you do have the fed whether they have more stimulus or not. you have real questions about china. and then the great unknown at the end of the tunnel is the debt ceiling and how all of that plays out not to mention the election. >> well, the equity risk premium which is the earnings yield minus the ten-year yield is pretty much record wide. we would look for a slight narrowing of that caused by a sell off in the ten year because of inflation tri tract and also a rise in pe ratios closer to 16 times operating or about 1600. >> real quick can we drill a little deeper and when we throw
up financials is that the entire world of financials or are we talking about investment banks, the money center banks? when it goes to energy the same kind of question. drilling down are you looking for more sort of performance right now from integrated names with those yields or are you looking more toward the refiners, toward the service sector? is there a little bit more depth we can go to on some of the areas? >> within the financials obviously if we're talking about a rise in the stock market, asset managers and brokers would benefit. the deal window would open up for some of them. on the banks it's the lending side and the insurance companies are looking very cheap, starting to write policies. they pretty much have to. on the energy side, refiners crack spreads are very wide. people don't think it is sustainable because of u.s. oil production and the demand for refined products. i do think it is sustainable. so the down stream side of petroleum is particularly attractive. that'll help the majors but also help the refinery. energy infrastructure as i mentioned earlier. the engineering companies, jake
objection engineering, foster wheeler would get a benefit as well. >> good to talk to you. thanks for coming on. >> thanks. >> barry bannister. you're our resident bull, pete. 1600. do we get that? >> that seems pretty lofty right now but 1500 i would be saying more yeah i would be in that camp. especially when you look at some of the areas where i think you can get some of that major performance certainly there are names. i look at something like jp morgan and wells fargo and i still think they remain very cheap. i do think there is a couple dollars worth of upside in many of the different financials. >> let me push you a little bit on that. you say 1500 is likely. a hundred more s&p points. if we get a hundred that means things have fallen into place pretty well? >> right. >> 1600 is not so out there as it might seem now. >> it is not as out there, not totally out there but i can tell you this. the bears were pounding the table at 1300. all we did was hear this bear hitting the mallet saying this is it. we're going to start going down. then at 13 and a quarter, 1350. 1400. all of them were saying all in. i tell you what, they are going
to be part of the reason we go to 1500 or 1600 because they have to chase. when you look at performance right now, look across and see the performance from many of the fund managers they've under performed. they've got to get in at some point. if they're late it is going to push it higher. >> the breadth of this last move up is very, very weak in terms of volume. i mean if we get a lot of momentum going in there in terms of the cash on the sidelines you could get them off into the 1600. so it's not too silly. >> all right. on the way nokia throwing a hail mary introducing its cutting edge smart phone today. can its luem mia 920 compete wi samsung and apple and google? facebook has beaten up shares today trading higher. why one investor isn't bending to the pressure to sell.
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lman at a citigroup conference today saying that the company is focused on mobile and right now they have a playbook that's working focusing on ads that are unobtrusive but also easy to monetize and adding to bullishness that no investors sold out in the lock up earlier last month. further momentum for yelp as you can see by the chart. >> thanks so much. simon, what do you think? a pretty good game for one day at least. >> yeah. i was on the show and we bought it at 18 on the 28th because it was really selling off based on the lock up expiration which we thought was over done given all with facebook and everything else so a big short interest. there is still a big short interest. i think it's the type of stock where it's up 40% or so that you don't take profits in it. still like the company but any time you can take a gain get some cash in this type of market you should do it. >> a great call by simon. i didn't get in it near his price but it was a great call by him. i just got called out of my call options i wrote against the stock last night. wish i was still in it today.
>> you are a good man for giving him props. linked in media having a good day, facebook, yelp and now this. >> though the general social media hasn't done well over the last couple months and linked in really does stand out not far off the 52-week high of 120. the 1 sa weekly calls were extremely active. they started the beginning of the day 30 cents actually 15 cents, 20 cents, 30 cents all the way up to 40 cents. these things got up over a dollar already today so the performance is there. a lot of people active in that. >> let's go facebook now getting friendly with shareholders four months after the flubed ipo. the ceo won't sell any shares for a year and it may be working at least for a day. the stock is moving higher today. let's welcome facebook investor robert peck, president of corise. welcome to the show. good to have you. >> thank you for having me. >> does this matter at all? >> yeah. a couple things. first of all at our company we spend all day talking to the entire digital media industry
and a couple takeaways we've gotten from talking to all of these people, one is that the current platform for facebook, and it is a platform, it is very rare in this space to have a platform like a google, facebook, amazon, etcetera. the platform is working and you're seeing that in the recent report where they're seeing brand retention when advertising is done on facebook of a hundred percent or so. they have almost all the top ad age, 100 or so, triple the traditional rates. so you're seeing strong returns from the core product itself. you add to that the big opportunities, option value in that we think they're working on. we don't know inside information but the industry thinks these would be obvious things they'd be looking at. right? one of them did a very good job talking about it which is the search opportunity. 1.6 billion searches per month on their site. if you monetize at the same rate of aol that is a billion dollar opportunity and 100% pure margin. >> i don't think anybody would disagree with a word you said. the problem is potential at this
point doesn't matter. the platform might be working. the stock is not. >> i agree. i think what has to happen for the stock to turn around is if you see the introduction of a couple of these different things, think about the other possibilities they could have as well. one is e-commerce. facebook will be in some sort of social commerce. today you don't see that at all. but if they just got 2% of the 500 million people that live on facebook every single day, to buy something through an amazon store on facebook, right there it's a $6 billion gross revenues of which facebook could get a billion or so from the commissions. so there are these huge opportunities that i think you'll see a turn of the stock as these sort of get announced. the other thing to think about too is a lot of the stuff that has been announced just got announced recently and is just being rolled out. one big one you see all the time talked about is mobile apps. the other is the app store. i think when you think about facebook it wants to be our identity online. it wants to be the open graph. this app store and subscription services distribution is a huge
opportunity for the company. when you think about them taking subscripti subscriptions, 20% or so, right now they don't take anything but as they do this more with other subscription services whether it be cable, hulu, netflix, spotify, another billion dollar opportunity. >> why isn't the market paying more attention to your sales pitch and others like it if you will given the fact the stock continues to go lower? >> i think the big thing is the show me story. as soon as you start to see some of the announcements or some on the earnings call an inflection in growth rate, maybe a reacceleration of growth that is when the market will come back and revisit it. in the near term, probably short-term choppy but longer term by speaking to industry participants and pundits in the space this is a tremendous opportunity. we think they'll execute again. >> one of the traders on the desk has a question for you. >> robert, first of all i wish you were a spokesman for the company rather than a share holder like me. you just laid out a great case for facebook going forward. >> thank you. >> unfortunately zuckerberg has been a lot like charlie chaplain
just a silent movie star. he is not out there saying anything like what you said except that his actions may be speaking louder than the nonwords he is speaking. >> right. >> because he is not selling for the next year. that was the single bit of good news we've got since the stock has come public and since mark zuckerberg went into hiding. >> yeah. great point. first of all look for him to break that silence i think on tuesday talking a tech crunch disrupt. look for that and get maybe a little more color. >> a day late and $19 short isn't it? like half the 38 or so. >> if you look at management's view of the long term look at the s1. the cfo did not sell shares. cheryl sandberg did not sell a share. mark zuckerberg only sold shares to cover taxes. >> peter teal sold a lot. >> de. i think that was a disappointment to the market. >> was it a disappointment to you? >> it was. i think there were some personal reasons there but when you look at the lock ups coming up, mark
and dr andresson said yesterday they're just covering taxes. >> they sold a lot of stock in the initial ipo too. let's not forget that. >> very true. management today is not selling one share and i think it is a testament to their view of where the stock can go over the longer term. >> right. >> i think they'll build this company for the longer term and not try to match short-term wall street expectations. >> bob, good to have your insight. thanks for coming on. grasso what do you do with facebook here? >> you know, you hit it right on the head. it was priced on potential and now is a prove it to me story. the bottom line is so many people are looking over this with magnifying lenses and the reason zuckerberg is not out there is maybe he just doesn't speak well in front of people. so at this point maybe it's better to leave him off on the sidelines. they're talking to institutions. they're not talking to the retail public. the retail public is the one who dictates the perception of the name right now is still a sell. >> pete, hold on to this one? >> i have. steve just brought up the potential. now what i heard from mr. peck
is there is opportunity. i love the fact that there is opportunity. we've been waiting on that. e-commerce, search, all the rest of the opportunities that lay out there. but those are still opportunities that we're still waiting on and, unfortunately, we need to get some more clarity and hopefully tuesday as you mentioned maybe is when we'll see a little more of that. i'd be curious if mr. peck decided at these levels is this a level he'd re-enter and buy a little more? >> he said in a couple years it'll be okay. in this space it's like a decade for the love of god. if you look at it, if he is going to sell in 12 months when do we all sell on this desk, ten months? stumd. >> simon, you like the yelp story. are you starting to like the facebook story? >> the revenue is still decelerating. there was an article by reuters saying facebook is down 34%. it is still expensive to the likes of google. i like the linked in story, yelp type of stories. if you're going to trade the name yes if you're going to stick it in your i.r.a. until you retire it might be higher but i'm talking the next 12 to
18 months. >> isn't that a lego tie? >> it is a lego tie. >> i don't know. if zuckerberg is not selling facebook shares for at least a year, i couldn't come up with something quick enough. could the stock be near bottom? tell us what you think. go to facebook.com/fast money and answer our poll. we'll post the results on fast money at ak p.m. eastern. coming up why qe 3 may not be a done deal. we'll go behind the infighting at the fed and the shanghai index trading at multi year lows. how the china factor could impact u.s. growth and your investments. looking for a better place to put your cash? here's one you may not have thought of -- fidelity. now you don't have to go to a bank to get the things you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits.
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welcome back. about to make the turn on halftime and here are our top three trades. dollar general beat the street, boosted its full year forecast on strong sales across all segments. pete? >> you know the same store sales were higher again just with the entire theme of the discounters including dollar general and names like dollar tree. take a look at ross. take a look at tjx. all of these discounters right now giving you great same store
sales, increases. you have to like the whole sector. >> monster run since the summer for shares of that one. sprint nextel with a pretty good run of its own. john, unusual activity in this one? >> indeed. what we call call stupds. they're coming in buying the october 4 1/2 calls and 5 1/2 calls. scott, the stock is turning over an awful lot of volume today too. normal over the last ten days is probably 30 million. it's already over 44 million today at noon which is pretty active. i think people are betting on the iphone and the presentation next wednesday by apple. >> a big week for gadgets. tomorrow amazon expected to unveil a new version of the kindle fire. grasso, i'm glad you're doing this one. >> exactly. we've talked about the stock. it's $190. i still love the stock. it's surrounded. we have the cloud trade, retail, tech. and there is so much speculation as to what they're going to unveil whether a bigger one, more memory, faster processor. there's a whole potpourri of an ecosystem that is just waiting
there for amazon. i still like the name. you might want to play it with upside calls. it might be a little expensive for retail. >> let's talk nokia. kicked off gadget palooza week with its new lumia phone. it's not winning over investors though. pete, it's kind of a rhetorical question right? there is no question. this is their shot. the last stand isn't it? >> i love the microsoft windows mobile. i think that is going to be great. i think the device looks unbelievably cool. the pure view. i love the fact it's got the wireless charging. there's a lot of reasons to like this. but obviously you're going up against a ploun tain of an opponent right now when looking at the androids of the world and all the rest of it. there is an uphill. i don't think they're going after apple but they want the next level and maybe over time they'll be able to convince the rest of the market out there they're in the right spot. >> can they do that at this point? can no contestya really make some noise? >> i don't think so. the game is over personally i think. the stock is down what 93% over the last five years?
it's the same as r.i.m. >> problem is even if the thing is well received, it is well received until september. what is it, the 12th? >> yeah. until next wednesday. but we all know, scott, there are going to be folks that want something other than the apple phone. so whether it's the samsung product or lg or hgc depending how much they have to modify those to meet the judge's ruling i think this is, you know, a niche phone much like the blackberry is. i'm not saying it's not a good move. >> i hear you. look. if people are going to buy the phone it is just maybe not going to be enough to move the needle. that's what matters most. >> not going to move the needle is my prediction. >> we've heard from the traders. let's find out what you think about nokia's latest phone. we've been monitoring the fast money twitter page and you join us with your tweets. >> scott, shares of nokia might be selling off but there are actually some bulls out there on twitter. let's get straight to the tweets. canadian club says this is a great time to buy more nokia. i'm long, ready for the move to five bucks a share. that is his target.
captain shoeman tweets nokia made great phones in the past but until i get one i'll defer it to samsung. lastly microsoft actually trending on the launch of nokia's windows phone. market daily says great growth opportunities for microsoft with its incremental product line. interesting. scott. >> yes. no doubt. pete, flip it right? flip it to microsoft. >> i love it from the microsoft perspective. they'll be involved in everything from the tablets to the phones and everything else that is going to be somewhat of a competition i think to the apple products. i like the -- i tell you what. they do finally have themselves in what is a cool factor. is it cool enough to take out apple? absolutely not. but is it cool enough to maybe take a chunk of the sector? absolutely. >> a lot riding on it right? simon, for microsoft? it's on the windows 8 platform. the mobile platform. that's big. >> and it's big, pat. i think in the short term it's a losing battle. i hear your point. i don't know anyone buying nokia phones, pete. all my friends are going --
>> that's john. you just switched on me. i'm a twin brother but we're not identical thank goodness. >> we're not twins. we're six years apart. go on. >> i'm confused. >> terrible for his father. >> a long labor. >> i've got one in each ear. >> like eight najarian boys. give simon a break. they all have ponytails. >> i feel like i'm in a huddle with the nfl with these guys. >> real quick 155 million share turnover today which is the most in i believe 40 days or so of trading in nokia. if you're looking for a blowout with the stock down whatever 12% or 14% today the guy method of watching would say maybe today is the washout so if you are somebody who wants to take a shot on nokia you got your shot today. >> still ahead china climbing a wall of worry as the newest data confirms fears of a slowdown. why one expert is sounding the alarms now and tomorrow a cnbc
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welcome back to cnbc. let's take a look at the price of crude oil today. note from citigroup at the top of the trading day this morning saying that events of recent weeks, hurricane isaac, the impact of eu and u.s. sanctions against iran have impacted the ability of reserve releases to get released in the near term saying the likelihood of that happening has increased in recent weeks. that could be more effective as we head into that autumn season. scott, i'd like to hear what traders think about this now that oil has made up all of those losses. >> thanks. grasso, bite your tongue on the political stuff but give me the energy trade here. >> you made me bite my tongue so long i don't think i have a tongue anymore. the truth is all of these things don't have lasting effects so you might see a little, you know, a slight little reaction for a couple days or so. >> yes. >> i wouldn't be trading off
spr. >> what do you like in the energy space? >> the only thing that still remains a buy and i'm confounded by this is the refineries space. everything else seems to have a tough row to hoe. at this point i think the refineries space is sort of out of gas as well. so if you profits in the refineer space take those profits off the table and wait for energy for the next month or so to see how the macro market plays out. >> i agree. i'm still holding on to a couple different refiners right now but i think it is time to buy some puts or scale back. >> is china the biggest headwind facing stocks? its manufacturing sector is shrinking. chinese stocks are trading at three-year lows. gordon chang has been bearish on china's growth since 2001 when he wrote the coming collapse of china. he joins us now. good to see you onset. welcome. >> thank you. >> so you've been so bearish for so long. china is obviously doing well in
the time you've been negative so i think it is fair to say that you missed the run there. what makes you so sure we're going to get a disaster in china which is the picture you're painting? >> by far the most reliable indicator of china's economic activity is the production of electricity and you look at the april through july period electricity production increased by less than an average of 1.2%. because the growth of electricity historically out paces the growth of the economy it means the economy can't be growing more than zero. you look at the manufacturing surveys, price indices, they suggest zero growth as do the mountains of copper in the car parks and iron ore in grain ris. after 35 years of growth the wheels are coming off the chinese economy. >> you say in your note china has already had a hard landing. >> right. >> so if this is a hard landing, all right. deal with that. >> yeah but we're not at the bottom yet. this is going to take some time to go. we see a political system that really can't come to grips with the economy.
we have a deteriorating global environment. we have a lot of headwinds in china itself such as bad dem graphy, antireform in the government. all sorts of things. you put it all together and it says china is on a long, downward trend. >> we had a guest on the top of the show today who said the s&p 500 by the end of this year is going to 1600 largely in part to maybe get more stimulus out of china to relieve some of the pain. >> yeah. people have been talking about stimulus in china for a very long time and it hasn't happened. in march we saw a rash of announcements and everyone said okay. the economy would pick up by july. well, it didn't. august looks even worse. these predictions of increase in the chinese economy go back to the first quarter of this year and it hasn't been happening. there's a reason. because the government doesn't have the flexibility for stimul stimulus. in some cases it's actually running out of some money so essentially what you've got is an economy almost in free fall. not quite. you can see the momentum picking up to the down side. >> can't you have a hard landing in certain sectors of the chinese economy without wrecking
the whole thing if you will? >> sure. that has happened in the past. in 1989 after the tiananmen massacre you had all sorts of problems in certain sectors of the economy but not in manufacturing and certainly not in the export sector. this time the problems are structural. they've cut across all sectors. so we're not just going to see problems in some portions of the economy. it is going to be economy wide. >> what does that mean though to the person watching the show, the individual investor if you will who is wondering okay. so this guy says china is going to have a hard landing. what is it going to mean to my portfolio going forward? >> china already is having a hard landing. if the portfolio is in the u.s. or global stocks, i don't think we've really discounted the problems in china. of course they will have an effect but i think they probably will be temporary because china is not a global engine of growth. china has actually been taking growth away from europe and the united states and other areas through its mercantile policies and so essentially could fall apart and after three or four weeks we wouldn't notice. >> interesting. good to have you on the show.
>> thank you. >> grasso how would you trade this one? >> you know what? everyone has been talking about how to pick the bottoms in iron ore, copper, steel, and coal. but the last guest obviously thinks that all of these are head fakes. so there's more room to the down side but there's got to be, to your point, there has to be a lot of bargains worth grabbing. but at this stage of the game i think you'd be fool hardy to rush into any of those names. >> pete, look. the shanghai composite is dreadful. >> yep. >> does it mean anything to how you would invest right now here in the united states? >> well, i think it depends on what your global picture is as far as the individual names that you're picking right now. how much is dependent on china? are you talking about the caterpillars of the world, starbucks and the growth? mcdonald's and the growth over there? it really depends on the actual individual names and the sectors you're affected by. >> caterpillar is a good example because you go back six months ago and they said oh, you know china is so important to us. but in their march conference call they said oh, no. china is just a small part.
but mcdonald's, though, i think could do very well because it's in a sector which is certainly going to see some more growth. and so you're really right. you have to look at the individual names. those in construction and heavy industry such as cat, you know, i think they're in real trouble. >> so we got bonus stock picks too. good to see you. see you soon. coming up infighting at the fed could put another round of easing in jeopardy. we'll go inside the battle when halftime report returns. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby,
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and today folks on power lunch we'll talk to the cofounder and former ceo of the nation's largest used car dealer. would you buy a used car from this man? lots of people do. we'll find out why he believes that obama is good for business. is apple under attack? we have the latest update on hackers who claim to have stolen information from millions of users. and the united states has possibly lost its power in foreign policy. that will be debated on power lunch. meanwhile back to the halftime team. >> all right. thanks so much. look forward to that. cnbc's senior economics reporter steve liesman is back from jackson hole and joins us now to break down some of the biggest chatter from the event, what the
fed can do about unemployment. that is the big question. the unemployment picture an awfully important jobs report coming up. >> right. what is the right target for unemployment and can the fed do anything about it? a simmering debate at the fed breaks out into the open in jackson hole. i want to walk you through the economics of the discussion. the unemployment debate. is it in the first instance structural? the result of deep changes in the economy like globalization for example. the skills mismatch. or a permanent lower growth. the key thing about structural unemployment, it won't respond to monetary policy. it's ingrained. other factors have to be used. let's look at the other side here. cyclical. the result of temporary factors like a recession, like a temporary economic shock. here's the key. monetary policy can put people back to work. bernanke says qe boosted payrolls by 2 million. let's take a look. let me show you what structural unemployment looks like. let's go back down the alley here to 1980 and look at italy. you had a 7 plus percent unemployment rate, 7.6. it went along like this.
came down. and then came back up. let's look at how long this was until it got back down. 19 years until they got back to the old unemployment rate. that is what people call, economists call structural unemployment. let's look at the u.s. over the same period. you're up, you're down, you're up, you're down. now the big question. if you don't mind, chris, just zoom in right here at the end. chris is the camera operator there. right here, is this coming back down to where it was before? or are we going to settle at some new rate that's higher? our guest former bush administration top economic official delivers a paper at jackson hole. he says it is cyclical any way i look at it. for example all the industries with the biggest job losses have had since the recovery began the biggest job gains. unemployment rose too fast to be structural. you saw that long, winding increase for italy. the united states showing the big slope up. government programs he says for example extended unemployment insurance could have kept the rate high. nonsense says jeff lacker from
the richmond fed, jim bull from st. louis and others. there he say he didn't look deep enough into the data. we have a high, long-term unemployment problem. that is a sign of structural. then they say this very interesting question, a little bit into the economics here. where the deflation? if there is all of this extra slack in the economy, prices should be falling. in fact, you have this large bump up in unemployment and then you look at the year over year end of inflation and there is no deflation there. the big question, guys, where does the number come back to? what is the right number? should the fed be aiming for a 5%, 6%, or 7% unemployment rate which means there's a lot less slack in the economy right now. that's the debate, scott. that's what the fed is puzzling over. how much it can do. how much progress it can have on unemployment. bernanke seems to think more qe could lower the unemployment rate. >> let's take the debate and put it on the traders right? it comes down to one thing and one thing only. whether there's qe 3, whether there isn't. it could be fighting, throwing their pocket protectors back and
forth. behind closed doors. >> i think there is a two step trade here. the guy has got to bet on qe and that makes a market. that makes a change in the market. but then do you take the second step and say okay. i'm betting there's qe and i'm and brings down the unemployment rate and helps growth? that's a second trade in my opinion. >> grasso? >> well, steve, i guess i'll push it back to you because you pour over this data more than we do. so has any of that other qe really an impact on the jobless rate on a significant basis? >> we know we brought down the unemployment. we were up around 10%. it's 8.3% and coincide with the time of quantitative easing in the economy. you do know if you lower rates you get more growth and little more employment out of the system. i think the story, steve, in my opinion is one of diminishing returns to push increasingly harder to get the results and the estimates i'm seeing for qe3
are like .1 or .2 on a 500 billion program in terms of employment. >> thanks, steve. >> thanks. all right. kicking off the nfl season tonight. fast money trader meet najarian putting on the game face. we'll get him and his brother's picks. we go first and goal next. . it's a game changer. ♪ it means cleaner, cheaper american-made energy. but we've got to be careful how we get it. design the wells to be safe. thousands of jobs. use the most advanced technology to protect our water. billions in the economy. at chevron, if we can't do it right, we won't do it at all. we've got to think long term. we've got to think long term. ♪ how do you know which ones to follow? the equity summary score consolidates the ratings
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opener a few hours away now we asked the two former nfl players to give us their season preview. pete and john najarian here. let's start with the big matchup. you know, i don't know, half hour or so from now. >> half hour? you get started early. >> who do you like? >> the giants. i got to like the giants. cowboys without wheaton and with him i don't think they have enough for the giants. the defense is just going to carve them up. eli -- >> yeah. >> the quarterback. >> two super bowls now. >> debatable before last year. now it's not. >> you are a redskins guy but the giants look ferocious. you can't stop them. >> redskins beat the giants twice last year. >> i know they did. >> super bowl, give me a pick. >> i like the niners. they showed it last year. god bless the giants. happy for them they won it but i thought outside of those two big mistakes they made they'd be in the super bowl and i believe they would have won it. >> do you think alex smith has
another -- back it up? >> yeah, i do. i think that harbaugh is the real deal and a fire in the belly after losing it and being that close. >> judge? >> yeah. >> real quick, neither john or pete wore a helmet in the playing days. >> the leather. it was leather! >> not a face mask. >> green bay packers. i love the 49ers for the reasons john laid out and randy moss but the packers with aaron rodgers, who will stop them? and the defense has the most turnovers of the nfl. >> always good for sleeper picks. >> i have a real sleeper and you were angry about it. >> i laughed asht it. >> russell wilson, pete carroll. the combination is something that the whole nfc west will have a problem stopping the offense this year. >> doc? >> pete said sleepless in seattle. not sleeper. i say go with baltimore. the other harbaugh. i think that's the sleeper team in the afc. >> baker, i'd ask you for your picks but you would throw out
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grasso, so much on the table this week. the ecb tomorrow. a big jobs report on friday. what's the final trade today ahead of all of it? >> is that me? >> yeah. >> someone was talking in my ear. >> you. >> i'm going to stick with amazon. the girl i took to the dance. i'm taking her home. >> doc. >> the nfl under armour. 30% of sales by women. >> are you serious? >> yes. >> also sponsored tottenham hot spurs. throwing you a bone after the nfl. >> thanks. >> merck going